I may be the only plaintiff’s class action lawyer in the country to agree with the Supreme Court’s 5-4 decision to decertify, and effectively end, the largest class action ever certified in an American court.  I come to my heterodox view of the case for two reasons.  First, the theory of the Wal-Mart plaintiffs is just not plausible.  A quick review of the facts: the case is brought by a handful of female employees in several of Wal-Mart’s 1000+ retail locations alleging gender discrimination in hiring and promotion.  They say the company paid them less than men for the same work or failed to promote them to higher paid management positions because of their gender.  If the plaintiffs alleged such discrimination were being committed by a particular named supervisor or group of named supervisors and backed up that charge with credible evidence like quotes from that person(s) indicating an anti-female policy, then the allegation would be plausible.  The women affected by that supervisor would have had their class certified years ago, and the Supreme Court would not have agreed to hear the case. 

But plaintiffs’ counsel (the case is run by the lawyers not the women employes who are their pawns) chose to broaden it to encompass the entire company.  This is not plausible without a great deal of factual corroboration.  Ideally, one would expect to see an admission from a top executive of the company to that effect, a red hot e-mail, even a disgruntled former executive to say it for attribution.  But the plaintiffs had nothing like that.  They relied on skimpy anecdotal evidence concerning a small number of Wal-Mart stores and a sociologist who believes the company’s policy of allowing each store to conduct its own hiring (decentralization) encouraged discriminatory hiring. 

I contrast this complaint with one of my civil RICO class actions alleging hiring of illegal immigrants, often at multiple locations.  We specfy hiring policies designed to ignore evidence that applicants are illegal.  Human Resource (HR) personnel are trained not to ask why a job applicant speaks no English while claiming to be a U.S. citizen, or why the applicant claims to live in state A but produces an ID issued by state B and, was born in state C but attended high school in Mexico.    Or, even more often, why an applicant was previously employed at the company under a different name and social security number or why their alien registration card does not have the requisite number of letters and numbers indicated on the Department of Homeland SEcurity’s website.  These are red flags which make the accusation of an unwritten policy of hiring illegal immigrants plausible.  (And there is often more, like our allegations that an HR worker at Perdue Farms was selling fake identity documents from her office, and was prosecuted for doing so, that HR workers “recruit” Hispanics and bring them to work at the company from distant places only to pay them submarket wages for doing unappealing jobs.)  A federal judge reading such allegations can easily find that they plausibly suggest the employer has a policy of hiring illegal immigrants.

So it’s easy to see why the Supreme Court found it necessary to hear the Wal-Mart case.  The certification of a “nationwide” class of all female Wal-Mart employees means the company’s future is on the line.  Wal-Mart would likely have to spend a great deal in attorney’s fees to defend the case and possibly to settle it for a vast sum generating weeks of  bad publicity.  This  would hurt the price of the company’s stock.   Yet, it seems fundamentally wrong to subject Wal-Mart to this fate without direct evidence of pervasive discrimination in the Company.  So the defense would amount to proving a negative.  Justice Ginsburg’s dissent stated that “subjective decision making can result in disparate impact” hiring  violating Title VII of the Civil Rights Act.  Translation: allowing each store to conduct its own hiring might mean some stores are applying hiring criteria which are neutral (not intended to discriminate) but have the effect of doing so.  It’s easy to see how this could happen at a big retail store where most workers are required to move heavy boxes  Requiring workers to exert physical strength on the job might deter women from applying for such positions.  So the fact the workforce in a particular retail store is 70% male would not evidence a policy of discrimination.  Rather, it reflects the applicant pool.  So Justice Ginsburg’s point doesn’t help resolve the question of whether this case should be certified as a class action.  We just don’t know enough to make the leap she has made.   I agree with the majority that to subject a company to a massive nationwide class action, the plaintiffs need to show more evidence of pervasive discrimination, preferably from the top of the company.  It’s theoretically possible that the Wal-Mart plaintiffs were right in their allegations, but that should not be enough to get a class certified.

What more is needed?  A few years ago the Supreme Court held that any complaint in federal court must allege enough “facts” which would make the allegations of misconduct alleged to be “plausible.”  So a plaintiff cannot say, “the defendant fired me because of my gender.”  The plaintiff needs to allege some facts to make that conclusion plausible, such as “I heard my supervisor say we’ll hire a man next time” or “all the other workers on my shift are men” or “my wages were below the male employees for the same work and I have been working there longer.”   Then the claim of discrimination can cross the line from possible to plausible.  (It need not be probable.)  The Supreme Court’s plausibility requirement was made for complaints not motions for class certification under Rule 23 of the Federal Rules of Civil Procedure.  All the Supreme Court actually did in the Wal-Mart case was to impose that requirement to a class certification motion.  This seems to make good sense to me.  If you have to state a plausible claim to get into the courthouse, then why shouldn’t you have to do so to get a class certified, which is a much more consequential decision.

Many commentators have been overstating the effect of the Supreme Court’s decision.  It does not signal the death knell for big class actions, or even nationwide ones.  It definitely makes it harder to get a class certified.  But for years it was too easy to do so, especially in alleging civil rights violations under section (b)(2) of Rule 23 (for non-monetary relief, i.e., an injunction to stop discriminating).  Lazy plaintiffs’ lawyers were using (b)(2) to get big money damages by calling it “back pay,” and the Supreme Court ended that practice in a 9-0 portion of the decision. 

The Supreme Court is not “hostile” to class actions.  In another case this term, Smith v. Bayer, it unanimously ruled that a decision by a federal judge not to certify a class will not preclude another member of the purported class from filing a new suit and trying to get it certified.  This has broad implications for the future of class actions, broader in my view than the Wal-Mart decision.  Plaintiffs’ lawyers will have to investigate their cases more thoroughly before making class allegations, thereby talking to a lot more members of the “class” they hope to represent.  This is all to the good.  We’ve come along way from the days when some lawyers filed motions to certify class actions with the complaint, and in many states, had a certified class action within a few weeks.  As a lawyer who brings class actions, I find this a welcome trend.